Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

Private equity in emerging markets: worth the risk?

Paris– Emerging market private equity funds offer institutional investors diversification, differentiated return drivers and an exposure to sector and geographical areas not accessible through stock exchanges. However, their performance is still unclear.

Data from eFront, the world’s leading alternative investment management software and solutions provider, shows that the pooled average performance of emerging market funds is lower than in developed markets, with returns of 1.46x and 1.55x respectively (see Figure 1).


However, as a result of emerging markets being heavily focused on venture and growth capital investments, which have a longer time to liquidity and report the value of their portfolio as the historical value, rather than fair market value, the performance of emerging market funds might be significantly understated.

A like-for-like comparison between emerging and developed markets funds in terms of strategy provides further insights:

  • Emerging market venture funds outperform (1.58x) their developed market peers (1.52x)
  • However, on a risk-adjusted basis (5% spread), developed market funds outperform
  • This outperformance disappears if the 25% spread is used
  • For LBO, developed market funds outperform (1.55x) their emerging market peers (1.39x)
  • However, on a risk-adjusted basis (5% spread), emerging market funds outperform
  • As with venture capital firms, this outperformance disappears if the 25% spread is used

In addition, LBO fund managers in developed markets seem to be able to maximise performance during the harvesting period, while LBO funds in emerging markets seem to exhibit a different pattern: assets not sold before the eighth year of the life of a fund generate only modest incremental returns (see Figure 2).

The positive news for investors in emerging markets is that, assuming that residual values are converted in equivalent or higher distributions, the risk-return profile of emerging market private equity funds is similar to those of developed markets.


Tarek Chouman, CEO of eFront, commented:

“Integrating emerging market private equity funds to portfolios comes down to risk, return and liquidity expectations, as well as a tolerance for a certain level of uncertainty surrounding unrealized performances. Such a conclusion may not be surprising to the experienced investor, but given a certain engrained negative sentiment towards emerging markets, it is a meaningful step to demonstrate such funds operate along a familiar risk-return progression, and that the data is out there, for those who seek it.”

For the full eFront FrontLine report, visit: https://www.efront.com/research-papers/frontline/frontline-research-paper-private-equity-in-emerging-and-developed-markets-a-comparative-approach/